Healthtech venture funding plateaus in 2019

More than $14.7bn was invested in healthtech during 2019 across 1,301 deals.

Last year saw a decline in funding and deal count for healthtech companies. Despite not matching 2018’s numbers, 2019 was still a strong year for the growing sector.

There was more than $14.7 billion invested worldwide in healthtech last year, compared to more than $16.7 billion in 2018, according to a recent report from PitchBook. Venture deal flow in the space dropped by 7 percent from 1,440 in 2018 to 1,301 in 2019.

“I wouldn’t call it a dip but a plateau,” Alex Frederick, a senior analyst at PitchBook, told Venture Capital Journal. “Over the last decade we have seen a sizable increase of venture activity focused on the healthtech space.”

The median pre-valuation amount for companies increased for Series B and Series C rounds during 2019. The median for Series B rounds was $50 million last year, which was up 37.9 percent from 2018, $40 million.

The pre-valuation for Series D rounds dropped drastically. The median dropped from $325 million in 2018 to $185 million in 2019.

Median deal size grew across Series B and beyond, with Series A, seed investments and angel-led deals reporting slight decreases.

Mobile and digital health, which help patients and doctor monitor and manage patient health needs, had a strong 2019. The sector was the only vertical that experienced growth across capital invested and deal count.

The market was about $24 billion in 2018 and is expected to grow by 26.1 percent by 2026 to reach a market size of $152 billion.

“We are seeing the FDA supporting these [digital solutions] and studying them,” said Frederick, who added that the FDA has approved several. “Just in the last month we have seen 12 companies receive VC funding. Definitely a lot of activity.”

Such sectors as virtual health, biometrics and wearables, operations and care management and health information tools experienced moderate declines in both deal count and value.

All of these markets are still expected to grow over the next few years, according to the report. Frederick said in the case of areas like virtual health and telemedicine, he expects them to grow more quickly as there is more corporate and personal adoption.

“We will at some point hit an inflexion point,” Frederick said. “We will see a big jump in adoption of virtual health.”

Omics and genomics experienced a sharper decline than the other sectors. Deal count in that sector dropped 41 percent from 24 deals in 2018 to 14 in 2019. The value of deals in the sector was also slashed by more than half to less than $400 million.

Frederick said that this sector has been interesting to watch. Last week, 23 and Me, which has captured two out of the three largest funding rounds in the sector over the last five years, laid off 100 workers.

Broadly, healthtech has had a strong start to 2020 with a flurry of deals closing in the first few weeks of the decade.

Pieces Technologies, a company that creates software to interpret patient data in real time, raised a $25.7 million Series B round. Concord Health Partners, OSF Ventures and Children’s Health participated in the round.

Medloop, which looks to provide technology to shift patient care from reactive to proactive, raised a €6 million Series A round from AXA and Kamet.

Looking ahead to the remainder of 2020 and beyond, Frederick said that one area he will be keeping his eye on is clinical trial management startups, which has had some increased activity.

The report added that it expects healthtech to continue to innovate and remain a robust area of investment opportunities in 2020.